Div Tip #15: 1% makes a difference.

Dividend Tips

Does 1% make a difference when you’re building your dividend stream?  Yes.  Absolutely.

Applying the Rule of 72 to a portfolio with a dividend stream growing at 8% means the stream will double in 9 years, assuming the compound growth rate continues.

Applying that same Rule to a 9% dividend stream growth rate means the total dividend payments will double in 8 years if the compounding growth rate is not interrupted.

The 1 year decrease (from 9 years to 8 years) in the time it takes your dividend stream to double represents an 11% reduction in doubling time brought about by a 1% increase in the compound annual growth rate of your dividend flow.  In other words, a 1% increase in an investment return can have an out-sized effect on your cash flow.  That’s why 1% makes a difference.